Errors on credit reports can lead to declined loans, higher deposit requirements and even a rejection for employment. A recent FTC (Federal Trade Commission) study revealed that 25% of consumers had errors on their credit reports. Errors which may result in higher consumer costs which can include paying more for car insurance, or not being approved for services like power, cable or internet, without large deposits. Imagine moving and having to shell out $200 to $400 to activate each service, rather than having the connection fee included with the first bill. Or being stuck with a provider you don’t like because of the high deposits required due to poor credit. Your credit file is used in many applications beyond getting a loan, making its accuracy a top priority.

Consumer groups understand the steep consequences of credit reporting errors and has lobbied for changes that enable consumers to dispute errors and present a clear picture of how bills are paid. Unfair practices has also gotten the attention of the New York Attorney General, who worked to reach an agreement with the three credit bureaus to implement changes to the way information is reported.

How Credit Reports Operate

The three major credit bureaus (Equifax, Experian and Trans Union) collect data on over 200 million consumers. This data is provided by companies with whom you do business.. Each company reports key data, such as credit limit, payment amount, available credit and status of timely payments, to the credit bureaus every month your account is active. Companies then purchase your credit file and use the information to make decisions.

With the increase in fraud, credit reports can also be used to verify your identity. In addition to payment history, credit bureaus also collect data on employment, addresses and other key personal information. This added use makes correctness all the more important.

Changes That Will Benefit Consumers

There are four key changes being made over the next three years regarding how errors are disputed, data recorded and agency communicate with consumers.

1)    Dispute process requires more personal attention by eliminating automatic rejections. Before this agreement credit bureaus almost always sided with the creditor if the company responded to the dispute. Now rejections must be reviewed by a trained employee that will evaluate the data received and make a fair judgement on the complaint.

2)    Medical Reporting is adjusted to account for delays in insurance payments. Now medical delinquencies cannot be reported until 6 months after the bill was due. This provides more time for companies to pay and provides more accurate reporting. Medical payments that are reported must be removed once the insurance company has made the payments.

3)    Consumer Communication. Credit bureaus must market the consumer’s access to a free credit report at Every consumer has a right to a free report from each bureau every 12 months. If a dispute is made, you must also receive a corrected report.

4)    Non-Contractual Items cannot be reported. This protects consumers from delinquencies that include things items such as fines and parking tickets.

5)     Paid or Settled Accounts in Collections will no longer be factored into the calculations that make up your credit score.  In the past, these accounts would still be used to calculate your credit score for the following 84 months after the account was paid in full or settled for less than the amount owed.  This recent change will particularly help consumers settling debts through a debt negotiation or credit card modification program and help them rehabilitate their credit score much sooner with current payments on existing credit accounts.

Thanks to the recent changes consumers will have the ability to maintain a more accurate credit file. You are still responsible for keeping track of bills and payments and ordering your free report to ensure its accuracy. However, consumers are now given more consideration in the dispute process, communication on the availability of free credit reports is more widely marketed, and leniency in reporting medical late payments are providing much needed relief.

For the full article from the New York Times

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